Business liability insurance comes with a lot of options. One of them is employment practices liability insurance, which protects you against liability for bad, or allegedly bad, employment decisions. You can buy the policy separately if it is not already part of your regular liability policy. Management-liability policies often incorporate EPLI as part of the protection they offer.

EPLI

EPLI kicks in if you're sued for wrongful termination, discrimination, sexual harassment or retaliation. Retaliation would apply if, for example, an ex-employee says you fired her for making a sexual harassment complaint. EPLI also covers you if the issue is defaming an employee, wrongfully failing to promote him, invading employee privacy or giving negligent evaluations. A typical EPLI policy covers not only you but any managers you have working for you and employees who have supervisory authority.

Costs

EPLI pays for the costs of defending against a lawsuit for wrongful termination and other covered issues. It also covers the costs if you have to pay off a claim in or out of court. However, an EPLI policy may not provide as much claims coverage as commercial general liability insurance does. With general liability, the company pays off claims up to the policy's value, and pays legal costs on top of that. With EPLI, the claims coverage goes down as the legal bills go up.

Limits

EPLI doesn't cover every contingency. Policies come with exclusions, and if your case falls into one of those categories, you're out of luck. Typical exclusions include employee lawsuits for bodily injury or damage to the employee's property, for instance. Even if you're safely within the boundaries of your policy, your company's better off if it doesn't have to fight a lawsuit. It's possible the damages will ultimately come out to more than your policy's value.

Umbrella Insurance

The more assets your business has, the more you stand to lose. If you're a sole proprietor, your personal assets are also at risk. One way to protect yourself is umbrella liability insurance. Umbrella policies kick in when your other liability policies are exhausted. If you think you have enough assets that $1 million in coverage is advisable, umbrella policies protect you in the face of a catastrophic loss.

Resources

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.